Brian Otto is a malt barley producer in Warner, Alta. He says he feels he is being held hostage by the current marketing system for malt barley, especially when he looks south of the border.

“Coors is operating just south of us in Sweet Grass Hills, Montana,” Otto says. “When the malt barley growers down there get a Coors contract, they never want to let it go. How come? Because they are doing very well and don’t have the ‘slippage’ problems we have here with malt barley.”

What’s slipping away, Otto says, is his profit margin. “We’re operating on razor-thin margins. In fact, I’d say our margins are so thin that we can’t afford any impediments, and I consider the board system an impediment to making money on a malt barley crop. I realize that they’re trying to change the way they do business, but they are still withholding payments.”

For Otto, successfully producing and marketing his malt barley boils down to cash flow and opportunity. “I need delivery opportunity,” he says. “When delivery opportunities are limited as they are now, we can’t get the cash when we need it to remain viable.”

With steep input costs, barley producers must receive a significant amount of cash at harvest to keep the financial “wolves at bay” as Otto describes it. “It’s a big problem when I’m forced to hold my barley for late delivery. I can’t pay my operating loan. Simple as that. Then when I do finally haul my barley, I only get 75 to 80 per cent of its worth. The 20 per cent that is held back could mean the producer can’t cover expenses. It’s not a good situation as most malt barley producers will tell you.”

The bottom line becomes the fault line on which success and failure rest. Otto says he always knows what it will take to be profitable and works toward his known bottom line.

“I lock in what I can,” he says. “The opportunity may be there to lock in higher than the cost of production, but Mother Nature still plays a role. In my area, I can’t lock in 25 to 30 per cent of what I think I’ll produce. For me, it’s smarter to wait and lock in more later after the season gets underway.”

Otto says the way the system stands now, he doesn’t receive true market signals and there’s a lack of transparency in pricing. “Surplus malt barley depresses malt prices,” he says. “When I add the problem of ‘slippage’ on freight, I lose even more money. I can ship my malt barley to Calgary for $15 per tonne, but I have to pay Vancouver freight rates. In this system, growers can’t get full value for quality product. This is a problem in my book.”

Malt barley producers are proud of their product, and many have agronomic skills sets that other countries envy. What Canadian producers don’t have, says Otto, is healthy competition to keep the markets alive and well.

“Since a lot of our malt down here in southern Alberta gets dumped into the local feed market, we would welcome competition from the U.S. malt companies,” he says.

In this scenario, the malt barley growers themselves would make sure they get paid for their premium malt barley product rather than have their product sometimes go to feed. Otto points out that malt prices aren’t published, which adds to the frustration. Otto says, “Malt barley prices are a board secret. They don’t release the price of malt barley. It’s market sensitive information that isn’t shared.”

Otto is considering his options should an open market system be instituted in Alberta. “Anybody can market grain, but to be realistic, it’s just not possible to be right 100 per cent of the time. But the opportunity to compete in the markets, especially with quality malt barley, is an opportunity we really can’t afford to be without anymore. Margins are just too thin. If we could open up the system, we’d have more choices, more competition, and more control of how and when malt barley is sold.”

Otto would like to work in an open market system with an open U.S. border. “Competition would be created,” he says. “And maltsters could play the competition game. The benefit to the producers is we’d get guaranteed delivery every time we meet specs and quality malt barley wouldn’t end up feed grade.”

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